Bank corporate loan delinquencies increase 3.5-fold in five years—eight times the rate of total loan growth
One in ten credit cooperatives face double-digit delinquency rates; asset quality remains under pressure despite bad debt write-offs
Domestic corporate loan delinquencies are expanding at an alarming pace. While overdue corporate loans in the banking sector have topped 10 trillion won for the first time, non-bank financial institutions are recording delinquency rates more than nine times higher than those of commercial banks. With one in ten mutual finance cooperatives and Saemaul Undong credit unions reporting double-digit delinquency rates, the dual burden of corporate insolvency and the deteriorating health of regional financial institutions has become a critical economic concern.
Data from financial authorities and the National Assembly, released on the 12th, show that overdue corporate loans at domestic banks reached 10.1 trillion won at the end of the second quarter of this year. This represents a 248.3% surge compared to the 2.9 trillion won recorded at the end of 2021. Over the same period, total outstanding corporate loans grew by 30.7%, rising from 1,071.1 trillion won to 1,400.5 trillion won.
While the total balance of loans grew roughly 1.3-fold, the volume of delinquent loans exploded nearly 3.5-fold. The growth rate of delinquencies was approximately 8.1 times higher than that of total loan balances. The banking sector’s corporate loan delinquency rate also rose from 0.26% at the end of 2021 to 0.68% in the second quarter of this year.
Bank corporate loan delinquencies climbed from 5.3 trillion won at the end of 2023 to 6.9 trillion won by the end of 2024, and reached 8.4 trillion won by the close of last year. In the first half of this year alone, an additional 1.7 trillion won in overdue loans pushed the figure past the 10 trillion won threshold.
Non-bank delinquency rate at 6.28%—nine times higher than banks
The pressure from insolvency is even more pronounced in the non-bank sector. Outstanding corporate loans at non-bank institutions—including savings banks, mutual finance, insurance companies, and specialized credit finance firms—grew 27.6%, from 469.8 trillion won at the end of 2021 to 599.6 trillion won by the second quarter of this year.
During the same period, the non-bank corporate loan delinquency rate climbed from 1.32% to 6.28%, which is approximately 9.2 times higher than the 0.68% rate observed in the banking sector. The combined corporate loan balance across all financial institutions stood at 2,000.1 trillion won in the second quarter, an increase of 459.2 trillion won since the end of 2021.
Market experts cite prolonged high borrowing costs, a stagnant real estate market, and lackluster performance among vulnerable firms as the primary drivers behind the rise in delinquencies. Real estate-related loans, in particular, face risks as project delays or falling collateral values make it increasingly difficult for borrowers to extend or refinance existing debt. Because loan compositions and borrower characteristics differ significantly between banks and non-bank institutions, the widening gap in delinquency rates is difficult to attribute to a single factor.
Recent statistics from the Financial Supervisory Service confirm a worsening trend in corporate loan quality. As of the end of July, the corporate loan delinquency rate at domestic banks stood at 0.78%, up 0.10 percentage points from the previous month. The delinquency rate for small and medium-sized corporations reached 1.00%, compared to 0.90% in the same month last year, while the household loan delinquency rate stood at 0.42%.
In June, the banking sector cleared 5.3 trillion won in non-performing loans, including both corporate and household debt. However, because banks tend to aggressively write off or sell debt at the end of a quarter, direct month-to-month comparisons of delinquency rates can be misleading. In July, new delinquencies rose to 3.2 trillion won while the volume of cleaned-up assets fell to 1.4 trillion won, causing the overall banking sector delinquency rate to tick upward again.
One in ten mutual finance cooperatives face high delinquency; 5.8 trillion won in bad debt sold
The strain on regional financial institutions persists. According to data provided to Representative Song Ok-ju of the National Assembly’s Agriculture, Food, Rural Affairs, Oceans and Fisheries Committee, there were 339 mutual finance cooperatives and Saemaul Undong branches with delinquency rates exceeding 10% as of the end of June.
This accounts for 9.9% of the total 3,437 institutions. The number increased by 135 (66.2%) compared to the 204 institutions reported at the end of last year. Given that the number of institutions with high delinquency rates reached 320 at the end of 2024, it is difficult to conclude that this is a sustained long-term increase, but it remains a significant area of concern.
Beyond simple delinquency rates, the proportion of bad debt remains high. Some 909 institutions, or 26.4% of all cooperatives and credit unions, reported a sub-standard loan ratio exceeding 8%. Sub-standard loans are considered unlikely to be recovered and serve as a key metric for assessing asset health.
Corporate loan delinquency rates reached double digits at credit unions (10.24%) and Saemaul Undong (10.17%). Syndicated loans handled by multiple cooperatives saw even higher delinquency rates, hitting 17.87% at forestry cooperatives and 17.70% at agricultural cooperatives.
The five mutual finance sectors sold a total of 5.796 trillion won in non-performing loans in the first half of this year, with Saemaul Undong accounting for the largest share at 3.478 trillion won. While selling non-performing loans is a common tool for improving asset health metrics, it does not address the underlying lack of borrower repayment capacity, which threatens to trigger fresh waves of delinquency.
Regarding the recovery of bad debt at Saemaul Undong, the Ministry of the Interior and Safety explained, "Due to dampened investment sentiment caused by the real estate slump and delays in auctions and public sales, the timely recovery of bad debt has become increasingly difficult."
